Your Right to Know

Gov. John Kasich’s proposed tax overhaul was whacked like a pinata yesterday, as business
groups, including the Ohio Chamber of Commerce, said it would hurt businesses and make the state
less competitive.

Dan Navin of the Ohio Chamber of Commerce relayed the consensus from his members: The governor’s
trade-off of lower income taxes for a major sales-tax expansion wasn’t worth it and would shift the
state tax burden more to businesses.

“In too many instances, (the sales-tax costs) more than offset the proposed income-tax rate
reductions and undermined our state’s recent economic-development progress and left Ohio less
competitive, not more,” Navin told the House Finance Committee.

“These were not just the usual concerns of individual companies griping about maybe having to
pay more tax.”

When he rolled out his tax plan last month, Kasich touted it as a major benefit for small
businesses and the state economy. He proposed a 20 percent income-tax cut, a deduction of 50
percent of business income up to $750,000, and a sales-tax cut of half a percentage point — paid
for largely with a major sales-tax expansion to most economic activity and a new tax on shale
drilling.

The overall plan would cut taxes, Kasich said, by $1.4 billion over three years.

But facing an avalanche of criticism, legislative Republicans are looking to make major changes
to the tax plan — or strip much of it out of the two-year, $63.3 billion budget.

House Finance Committee Chairman Ron Amstutz, R-Wooster, said he doesn’t expect the House will
have a finished tax package ready before the budget is sent to the Senate, possibly in mid-April. “
I’m sure we can make significant improvements as the process continues.”

William Ridenour, president of Polymer TransAction Advisors, a plastics and chemical industries
consultant in Newbury, east of Cleveland, said most of his competitors are out of state and the
sales-tax expansion would have “potentially severe, catastrophic consequences” on his company.

Meanwhile, the income-tax cut would do little to offset his costs from the sales tax, Ridenour
said.

“Whether it’s 6 percent or5 percent, it’s a non-event for me,” he said of the income tax. “It’s
not significant enough to make a decision on hiring.”

In 2009, of the 717,000 Ohioans who filed some sort of business income, 90 percent earned less
than $50,000, qualifying them for a tax break of $1,000 or less under the proposed 50 percent
deduction.

A business owner earning $500,000 would get a tax break of about $17,000, a level reached by 0.6
percent of business owners.

“You’re spreading around a huge amount of revenue to a very large number of people, the vast
majority of whom are never going to create jobs,” said Michael Mazerov of the Center on Budget and
Policy Priorities. Nationally, about 80 percent of business owners employ no one.

“It’s understandable that businesses are happy to take the tax cut,” he said. “But when you
fritter away a small tax cut on thousands of businesses, for any one business, it doesn’t do enough
to be the difference in whether they can create a job.”

The state’s top representative of small businesses, the NFIB/Ohio, told legislators that the
National Federation of Independent Businesses had no official position on the tax plan because its
members were split on the proposal. Generally, they like the income-tax cut but oppose the
sales-tax expansion.

The proposed sales tax on commercial leases caused the most concern, said Chris Ferruso of the
NFIB.